FINAL REGULATIONS ISSUED REGARDING
PPACA REPORTING REQUIREMENTS
Somewhat hidden behind all the hoopla surround the employer mandate and how employers will manage or avoid assessment of the mandate penalties ($2,000 “no offer” penalty and $3,000 defective coverage penalty, both figures subject to automatic indexing) — extensive reporting requirements will also apply under PPACA. Specifically, every organization providing health care coverage to employees must file a return to the IRS that reports the terms and conditions of the health care coverage provided during the year. The nature of the report depends on the employer’s size and type of health care coverage provided. Employees are also required to receive a summary of the report.
What is Section 6055 reporting?
Section 6055 of the Internal Revenue Code of 1986, as amended (the “Code”) requires employers, insurance issuers and governments providing individuals with any health plan coverage to convey information concerning the type and period of coverage provided. The final rules set forth the general reporting method employers will use, with options to streamline reporting if certain conditions can be satisfied. Section 6055 was enacted to provide assistance to the IRS and individuals for collecting the requisite information under the individual mandate.Details about coverage offered: Section 6056 creates a new IRS reporting obligation for an applicable large employer (one with 50 or more full-time employees and full-time equivalents) that is intended to deliver information about the type of health coverage the employer offered to full-time employees under health care reform.
Details about coverage offered: Section 6056 creates a new IRS reporting obligation for an applicable large employer (one with 50 or more full-time employees and full-time equivalents) that is intended to deliver information about the type of health coverage the employer offered to full-time employees under health care reform.
“Smaller” large employers using the one-year delay must report. Employers with fewer than 100 employees are eligible for an additional one-year delay under the employer mandate. An employer that is eligible for this special relief is still required to report to the IRS in 2016, however that report will simply serve to certify that the “smaller large” employer satisfies all of the eligibility conditions necessary to qualify for the delay. The IRS states that it will soon publish health care reform related forms and it is anticipated that special codes will be used to help the employer indicate it was not required to comply with the mandate in 2015.
Coverage Details. Employers must provide coverage details to workers to help enable individuals to assess whether or not they are eligible for a federal premium tax credit to subsidize the purchase of health insurance through a health insurance “Exchange.” The reporting requirement also assists the IRS in administration of the employer mandate. The government intends to use the reported information to evaluate tax credit eligibility.
Streamlined Information Reporting (Combined form)
Large employers offering self-insured coverage will have a dual reporting requirement – Section 6055 (Type and Period of Coverage and Section 6056 (Coverage Details). The final rules provide for a single, consolidated form that employers will use to report to the IRS and employees under both sections 6055 and 6056, which is intended to save time by avoiding duplicative efforts.
The combined form contains two sections:
- The information needed for section 6056 reporting, and
- The information needed for section 6055.
Employers self-insuring and required to complete the combined form are permitted to contract with outside parties for filing reports and furnishing employee statements to comply with section 6056. However, employer oversight is required as any contractual arrangement will not transfer or shield an employer from potential liability stemming from the third party’s error or omission.
Section 6055 Minimum Essential Coverage Reporting
This section is applicable to health issuers, employers, governments and other entities that provide minimum essential coverage to individuals.
- Self-funded: Plan sponsors for self-insured groups are responsible for the filing. The general aggregation rules for controlled groups are not applicable for this requirement, thus, each employer in a controlled group is treated as a plan sponsor and separately responsible for reporting.
- Insured plans: Insurance carriers are required to report for employers sponsoring fully insured plans as well as qualified health plans enrolled through a SHOP Exchange. Governmental employers are subject to the filing requirement but may designate that responsibility to another person.
- Exceptions: Some types of programs are specifically excepted from a reporting obligation. For example, on-site medical clinics, or “wellness programs” that are an element of other minimum essential coverage (such as wellness programs offering reduced premiums or cost-sharing under a group health plan) are excused. In addition, programs “supplementing” a primary plan of the same plan sponsor or that supplements government-sponsored coverage (such as Medicare) are also excused from reporting. (Of course, Medicare Secondary Payer rules generally preclude an employer’s ability to furnish Medicare Supplement coverage.)
Reporting: What details are required?
Federal law requires that the following information be reported:
For section 6055
- Information about the entity providing coverage, including contact information.
- Individuals are enrolled in health coverage, with identifying information and the number of months for which they were covered.
For section 6056
- Information about the employer offering coverage (including contact information and the number of full-time employees).
- For each full-time employee, information about the coverage (if any) offered to the employee, by month, including the lowest employee cost of self-only coverage offered.
Simplified Reporting: “Helpful” Employer Option
Employers providing “qualifying offers” are eligible for simplified reporting. However, specific conditions must be satisfied.
- What is a qualifying offer? A qualifying offer is an offer of minimum value coverage that provides employee-only coverage at a cost to the employee of no more than 9.5 percent of the Federal Poverty Level in the 48 contiguous states (estimates for 2015 are not yet available – but based on the 2014 number would equate to approximately $1,108), combined with an offer of coverage for the employee’s family.
- Full year of qualifying offer: For employees who receive qualifying offers for all 12 months of the year, employers will need to report only the names, addresses, and taxpayer identification numbers (TINs) of those employees and the fact that they received a full-year qualifying offer. Employers must also deliver a copy of that simplified statement to the worker certifying that the employee received a full-year qualifying offer.
- Less than full year: For employees who receive a qualifying offer for fewer than all 12 months of the year, employers will be able to simplify reporting to the IRS and to employees for each of those months by simply entering a code indicating that the qualifying offer was made.
- Special rule: Employers certifying that they have made a qualifying offer to at least 95% of their full-time employees (plus an offer to their families) will be able to use an even simpler alternative reporting method for 2015. Those employers will be able to use the simplified, streamlined reporting method for their entire workforce, including for any employees who do not receive a qualifying offer for the full year. Those employers will provide employees with standard statements relating to their possible eligibility for premium tax credits.
- Option for blanket full-time designation: The final regulations also give employers the option to avoid identifying in the report which of its employees are full-time, and instead to just include in the report an estimate of those employees who may be full-time. As a condition of this option, the employer must document that it offered affordable, minimum value coverage to at least 98% of the employees on whom it is reporting.
When is Reporting Effective?
Although these reporting rules were originally planned to go into effect with the PPACA employer mandate, reporting requirements were delayed for 2014 (along with the general employer mandate delay). Therefore, the first reporting will not generally become due until early 2016.
- Filing deadlines: The final regulations provide that health coverage reports must be filed with IRS annually, no later than February 28 (March 31 if filed electronically) of the year immediately following the calendar year to which the return relates. (In other words, the same filing schedule cycle that employers use for Form W-2.) Due to the reporting postponement, the first required reports to be filed are for the 2015 calendar year and must be filed no later than March 1, 2016, or March 31, 2016, when filed electronically.
- Employee statements: Also under the final regulations, employee statements must be furnished annually to full-time employees on or before January 31 of the year immediately following the calendar year to which the employee statements relate. This would mean that the first employee statements for 2015 must be delivered by February 1, 2016 (because January 31, 2016 is a Sunday).
- Electronic reporting: The final regulations make electronic filing of information returns mandatory except for organizations filing fewer than 250 W-2 returns during the calendar year.
An employer that fails to comply with these reporting requirements risks a variety of possible penalties, including assessment for failure to file an “information return” or “failure to furnish payee statements.” The general penalty amount is $100 for each statement with respect to which the failure occurs, with the total penalty amount capped at $1,500,000. In addition, other provisions allow for “reduced penalties” if corrections are made within a specified period, or further reductions may be available based on the gross earnings of the employer organization. Penalties may even be waived if the failure is due to reasonable cause, and not to willful neglect.
Employers – Next Steps
Employers who will be, or may be subject to the employer mandate should do the following in preparation of the reporting requirement outlined above:
- Determine its reporting obligation. Employers should determine whether it is subject to Form 6056 reporting, Simplified Reporting, or Combined Reporting (self-funded).
- Once an employer’s reporting obligations is determined, assigning responsibility for the relevant reporting requirement is required. If an employer self-insures, it should begin communications with its third-party administrator to determine whether the TPA will prepare or assist with the preparation of the reports.
- Ensure the relevant recordkeeping processes are in place in order to obtain the information required to be reported.
- Review and evaluate current TPA agreements to cover the reporting requirements and allocate responsibilities. (Ensure the employer is protected from liability in the event of a TPA’s errors and omissions.)